Item 9A. Controls and Procedures
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We have established disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934. Under the supervision and with the participation of our management, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of December 31, 2020 to ensure that the information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our principal executive officer and principal financial officer as appropriate, to allow timely decisions regarding required disclosure. Our management, with participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2020. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2020 to provide reasonable assurance that the information required to be disclosed by us in this Annual Report was (a) reported within the time periods specified by SEC rules and regulations and (b) communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding any required disclosure.
Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management, including our principal executive, financial and accounting officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2020 based on the framework in Internal Control—Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, our management concluded that our internal control over financial reporting was effective as of December 31, 2020.
Cybersecurity
We utilize information technology for internal and external communications with vendors, clinical sites, banks, investors and shareholders. Loss, disruption or compromise of these systems could significantly impact operations and results.
We are not aware of any material cybersecurity violation or occurrence. We believe our efforts toward prevention of such violation or occurrence, including system design and controls, processes and procedures, training and monitoring of system access, limit, but may not prevent unauthorized access to our systems.
Other than temporary disruption to operations that may be caused by a cybersecurity breach, we consider cash transactions to be the primary risk for potential loss. We and our financial institution take steps to minimize the risk by requiring multiple levels of authorization and other controls.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) during the fiscal quarter ended December 31, 2020 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Inherent Limitations on Effectiveness of Internal Controls
In designing and evaluating the disclosure controls and procedures, management does not expect that our internal control over financial reporting will prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud.
ITEM 9B. OTHER INFORMATION
None.
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PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this item and not set forth below will be set forth in the sections headed “Election of Directors,” “Management and Named Executive Officers” and “Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive proxy statement for our 2020 Annual Meeting of Stockholders, or our Proxy Statement, to be filed with the SEC within 120 days after the end of the fiscal year ended December 31, 2020 and is incorporated herein by reference.
We have adopted a written code of business conduct and ethics that applies to our directors, officers and employees, including our principal executive officer, principal financial and accounting officer or controller, or persons performing similar functions, known as the Code of Ethics and Business Conduct. The Code of Ethics and Business Conduct is available on our website at www.markertherapeutics.com under the Corporate Governance section of our Investors page. If we make any substantive amendments to, or grant any waivers from, the code of business conduct and ethics for any officer or director, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this item will be set forth in the section headed “Executive Compensation-Compensation Discussion and Analysis” in our Proxy Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this item will be set forth in the section headed “Equity Compensation Plan Information” and “Security Ownership of Management and Certain Beneficial Owners” in our Proxy Statement and is incorporated herein by reference.
The information required by Item 201(d) of Regulation S-K will be set forth in the section headed “Executive Compensation-Compensation Discussion and Analysis” and “Board of Directors and Corporate Governance” in our Proxy Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
The information required by this item will be set forth in the section headed “Certain Relationships and Related Transactions” and “Board of Directors and Corporate Governance” in our Proxy Statement and is incorporated herein by reference.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this item will be set forth in the section headed “Independent Auditors’ Fees and Services” in our Proxy Statement and is incorporated herein by reference.
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PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
(a) The documents filed as part of this report are as follows:
1. The financial statements and accompanying report of independent registered public accounting firm are set forth immediately following the signature page of this report on pages F-1 through F-21.
2. All financial statement schedules are omitted because they are inapplicable, not required or the information is included elsewhere in the financial statements or the notes thereto.
3. The following is a list of exhibits filed as part of this Annual Report on Form 10-K.
EXHIBIT INDEX
Incorporated by Reference
Exhibit
number
Exhibit description
Form
File no.
Exhibit
Filing
date
Filed
herewith
3.1
Certificate of Incorporation
8-K
001-37939
3.4
10/17/18
3.2
Bylaws of Marker Therapeutics, Inc.
8-K
000-37939
3.6
10/17/18
4.0
Form of Common Stock Certificate of Marker Therapeutics, Inc.
8-A/A
000-37939
4.1
10/17/18
4.1
Form of Common Stock Purchase Warrant
8-K
000-27239
4.1
8/14/14
4.2
Form of Placement Agent Warrant Common Stock Purchase Warrants-Series A
8-K
000-27239
4.6
1/12/15
4.3
Form of Placement Agent Warrant Common Stock Purchase Warrants-Series C
8-K
000-27239
4.8
1/12/15
4.4
Form of Placement Agent Warrant Common Stock Purchase Warrants-Series D
8-K
000-27239
4.9
1/12/15
4.5
Form of Placement Agent Warrant Common Stock Purchase Warrants-Series E
8-K
000-27239
4.10
1/12/15
4.6
Form of Placement Agent Warrant Common Stock Purchase Warrants-Series A-1
8-K
000-27239
4.6
3/10/15
4.7
Form of Placement Agent Warrant Common Stock Purchase Warrants-Series E-1
8-K
000-27239
4.10
3/10/15
4.8
Form of Amended Series A Warrant
8-K
000-27239
4.2
8/11/16
4.9
Form of Amended Series C Warrant
8-K
000-27239
4.3
8/11/16
4.10
Form of Amended Series D Warrant
8-K
000-27239
4.4
8/11/16
4.11
Form of Amended Series E Warrant
8-K
000-27239
4.5
8/11/16
87
Table of Contents
Incorporated by Reference
Exhibit
number
Exhibit description
Form
File no.
Exhibit
Filing
date
Filed
herewith
4.12
Form of Amended Series A-1 Warrant
8-K
000-27239
4.6
8/11/16
4.13
Form of Amended Series D-1 Warrant
8-K
000-27239
4.7
8/11/16
4.14
Form of Series F Warrant
8-K
000-27239
4.9
8/11/16
4.15
Form of Series F-1 Warrant
8-K
000-27239
4.10
8/11/16
4.16
Form of August 2016 Private Placement Warrant
8-K
000-27239
4.1
8/11/16
4.17
Form of 2016 Private Placement Agent Warrant
8-K
000-27239
4.11
8/11/16
4.18
Form of June 2017 Private Placement Warrant
8-K
001-37939
4.1
6/22/17
4.19
Form of 2017 Private Placement Agent Warrant
8-K
001-37939
4.2
6/22/17
4.20
Form of Warrant Amendment Agreement August 2016 Private Placement
8-K
000-27239
10.3
8/11/16
4.21
Form of Warrant Exercise Agreement
8-K
001-37939
10.3
6/22/17
4.22
Form of Private Placement Warrant
8-K
001-37939
4.1
6/8/18
4.23
Form of Private Placement Warrant
8-K
001-37393
4.2
6/8/18
4.24
Form of Marker Warrant
8-K
001-37939
2.1
5/15/18
4.25
Description of Common Stock of Marker Therapeutics, Inc.
10-K
001-37939
4.25
3/12/20
10.1
Form of Restructuring Agreement dated May 28, 2015
8-K
000-27239
10.1
6/3/15
10.2
Amended and Restated Restructuring Agreement, dated as of June 2, 2015
8-K
000-27239
10.1
6/5/15
10.3
Form of Securities Purchase Agreement (including registration rights)
8-K
001-37939
10.1
6/8/18
10.4
Registration Rights Agreement
8-K
001-37939
2.1
5/15/18
10.5
License and Assignment Agreement, dated July 21, 2015, with The Mayo Foundation for Medical Education and Research**
10-Q
000-27239
10.1
8/14/15
10.6
License and Assignment Agreement with Mayo Foundation for Medical Education and Research dated May 19, 2016**
10-Q
000-27239
10.1
8/15/16
10.7
Exclusive License Agreement between Baylor College of Medicine and Marker Therapeutics, Inc. dated March 16, 2018***
10-K
001-37939
10.21
3/15/19
10.8
Sponsored Research Contract between Baylor College of Medicine and Marker Therapeutics, Inc. dated November 16, 2018***
10-K
001-37939
10.22
3/15/19
10.9
2009 Stock Incentive Plan*
DEF14-C
000-27239
B
1/29/10
88
Table of Contents
Incorporated by Reference
Exhibit
number
Exhibit description
Form
File no.
Exhibit
Filing
date
Filed
herewith
10.10
2014 Omnibus Stock Ownership Plan, as amended through August 29, 2017*
8-K
001-37939
10.1
9/5/17
10.11
Amendment to 2014 Omnibus Stock Ownership Plan, as amended *
8-K
001-37939
4.4
10/17/18
10.12
Form of Stock Option Award Agreement –Employee*
8-K
001-37939
10.3
10/23/18
10.13
Form of Stock Option Award Agreement – Non-Employee Director*
S-8
333-228056
10.1
10/30/18
10.14
Form of Stock Option Award Agreement – Consultant*
8-K
001-37939
10.2
10/23/18
10.15
Form of Restricted Stock Award Agreement – Consultant*
10-Q
000-27239
10.7
11/16/15
10.16
Employment Agreement between TapImmune Inc. and Peter Hoang dated as of September 22, 2017*
8-K
001-37939
10.1
9/25/17
10.17
Employment Agreement by and between TapImmune Inc. and Michael J. Loiacono dated as of August 25, 2016*
8-K
000-27239
10.1
8/25/16
10.18
Amendment to Employment Agreement between Marker Therapeutics, Inc. and Michael J. Loiacono dated as of November 27, 2018*
8-K
001-37939
10.2
12/3/18
10.19
Employment Agreement between Marker Therapeutics, Inc. and Anthony Kim dated as of November 27, 2018*
8-K
001-37939
10.3
12/3/18
10.20
Consulting Agreement between Dr. Juan Vera and Marker Therapeutics, Inc. dated October 19, 2018*
8-K
001-37939
10.1
10/23/18
10.21
Form of Director and Officer Indemnification Agreement*
10-K
001-37939
10.39
3/15/19
10.22
Amendment to Employment Agreement between Marker Therapeutics, Inc. and Peter Hoang, dated March 14, 2019*
10-K
001-37939
10.40
3/15/19
10.23
Employment Agreement between Marker Therapeutics, Inc. and Mythili Koneru, dated February 6, 2019.*
10-Q
001-37939
10.3
5/10/19
10.24
Marker Therapeutics, Inc. 2020 Equity Incentive Plan
S-8
333-239136
99.1
6/12/20
89
Table of Contents
Incorporated by Reference
Exhibit
number
Exhibit description
Form
File no.
Exhibit
Filing
date
Filed
herewith
10.25
Form of Stock Option Grant Notice and Stock Option Agreement under the Marker Therapeutics, Inc. 2020 Equity Incentive Plan.
10-Q
001-37939
10.1
11/9/20
10.26
Form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement under the Marker Therapeutics, Inc. 2020 Equity Incentive Plan.
10-Q
001-37939
10.2
11/9/20
21.1
List of Subsidiaries
X
23.1
Consent of Marcum LLP, an independent public accounting firm.
X
24.1
Powers of Attorney (included on signature page).
X
31.1
Certification of Chief Executive Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).
X
31.2
Certification of Chief Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a) or 15d-14(a).
X
32.1
Certification of Chief Executive Officer pursuant to 18 U. S. C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.#
X
32.2
Certification of Chief Financial Officer pursuant to 18 U. S. C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.#
X
101.INS
XBRL Instance Document
X
101.SCH
XBRL Taxonomy Extension Schema Document
X
101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document
X
101.DEF
XBRL Taxonomy Extension Definition Linkbase Document
X
101.LAB
XBRL Taxonomy Extension Label Linkbase Document
X
101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document
X
* Executive management contract or compensatory plan or arrangement.
90
Table of Contents
** Confidential treatment has been granted as to certain portions of this exhibit pursuant to Rule 406 of the Securities Act of 1933, as amended, or Rule 24b-2 of the Securities Exchange Act of 1934, as amended.
*** Portions of this exhibit (indicated by asterisks) have been omitted pursuant to a request for conditional treatment and this exhibit has been submitted separately with the SEC.
# These certifications are being furnished solely to accompany this annual report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
ITEM 16. FORM 10-K SUMMARY
None.
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Table of Contents
SIGNATURES
Pursuant to the requirements of Section 13 and 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: March 9, 2021
Marker Therapeutics, Inc.
By:
/s/ Peter Hoang
Peter Hoang
Chief Executive Officer (Principal Executive Officer)
By:
/s/ Anthony Kim
Anthony Kim
Chief Financial Officer (Principal Financial and Accounting Officer)
POWER OF ATTORNEY
Each of the undersigned officers and directors of Marker Therapeutics, Inc., hereby constitutes and appoints Peter Hoang and Anthony Kim, their true and lawful attorney-in-fact and agent, for them and in their name, place and stead, in any and all capacities, to sign their name to any and all amendments to this Report on Form 10-K, and other related documents, and to cause the same to be filed with the Securities and Exchange Commission, granting unto said attorneys, full power and authority to do and perform any act and thing necessary and proper to be done in the premises, as fully to all intents and purposes as the undersigned could do if personally present, and the undersigned for himself hereby ratifies and confirms all that said attorney shall lawfully do or cause to be done by virtue hereof.
S-1
Table of Contents
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on March 9, 2021 on behalf of the registrant and in the capacities indicated.
Signature
Title
Date
/s/ Peter Hoang
President, Chief Executive Officer and Director (Principal Executive Officer)
March 9, 2021
Peter Hoang
/s/ Frederick Wasserman
Director
March 9, 2021
Frederick Wasserman
/s/ David Laskow-Pooley
Director
March 9, 2021
David Laskow-Pooley
/s/ John Wilson
Director
March 9, 2021
John Wilson
/s/ Juan Vera
Director
March 9, 2021
Juan Vera
/s/ N. David Eansor
Director
March 9, 2021
N. David Eansor
/s/ Steve Elms
Director
March 9, 2021
Steve Elms
/s/ Anthony Kim
Chief Financial Officer (Principal Financial and Accounting Officer)
March 9, 2021
Anthony Kim
S-2
Table of Contents
MARKER THERAPEUTICS, INC.
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2020 AND DECEMBER 31, 2019
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to the Consolidated Financial Statements
F-1
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Marker Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheet of Marker Therapeutics, Inc. (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, stockholders’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 2020, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph - Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
Critical Audit Matters
Critical Audit Matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ Marcum LLP
Marcum LLP
We have served as the Company’s auditor since 2014.
New York, NY
March 9, 2021
F-2
Table of Contents
MARKER THERAPEUTICS, INC.
CONSOLIDATED BALANCE SHEETS
December 31,
December 31,
2020
2019
ASSETS
Current assets:
Cash and cash equivalents
$
21,352,382
$
43,903,949
Prepaid expenses and deposits
2,057,924
1,526,442
Interest receivable
559
56,189
Other receivable
1,000,000
—
Total current assets
24,410,865
45,486,580
Non-current assets:
Property, plant and equipment, net
3,570,736
417,528
Construction in progress
6,789,098
—
Right-of-use assets, net
10,844,116
455,174
Total non-current assets
21,203,950
872,702
Total assets
$
45,614,815
$
46,359,282
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities
$
6,013,010
$
1,757,680
Lease liability
388,792
204,132
Warrant liability
-
31,000
Total current liabilities
6,401,802
1,992,812
Non-current liabilities:
Lease liability, net of current portion
11,868,440
280,247
Total non-current liabilities
11,868,440
280,247
Total liabilities
18,270,242
2,273,059
Commitments and contingencies (see Note 15)
—
—
Stockholders' equity:
Preferred stock - $ 0.001 par value, 5 million shares authorized and 0 shares issued and outstanding at December 31, 2020 and 2019, respectively
—
—
Common stock, $ 0.001 par value, 150 million shares authorized, 50.7 million and 45.7 million shares issued and outstanding as of December 31, 2020 and 2019, respectively
50,731
45,728
Additional paid-in capital
383,533,326
371,573,909
Accumulated deficit
( 356,239,484 )
( 327,533,414 )
Total stockholders' equity
27,344,573
44,086,223
Total liabilities and stockholders' equity
$
45,614,815
$
46,359,282
The accompanying notes are an integral part of these consolidated financial statements.
F-3
Table of Contents
MARKER THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Years Ended
December 31,
2020
2019
Revenues:
Grant income
$
466,785
$
213,194
Total revenues
466,785
213,194
Operating expenses:
Research and development
18,880,751
12,764,804
General and administrative
10,471,846
9,977,196
Total operating expenses
29,352,597
22,742,000
Loss from operations
( 28,885,812 )
( 22,528,806 )
Other income (expense):
Change in fair value of warrant liabilities
31,000
18,000
Interest income
148,742
1,082,842
Net loss
$
( 28,706,070 )
$
( 21,427,964 )
Net loss per share, basic and diluted
$
( 0.61 )
$
( 0.47 )
Weighted average number of common shares outstanding
47,039,862
45,587,734
The accompanying notes are an integral part of these consolidated financial statements.
F-4
Table of Contents
MARKER THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (DEFICIT)
Total
Common Stock
Additional Paid-
Accumulated
Stockholders'
Shares
Par value
in Capital
Deficit
Equity
Balance at January 1, 2019
45,440,704
$
45,440
$
365,400,748
$
( 306,105,450 )
$
59,340,738
Stock options exercised for cash
11,980
12
57,732
—
57,744
Warrants exercised for cash
190,258
190
758,543
—
758,733
Stock warrants cashless exercised
9,449
9
( 9 )
—
—
Stock-based compensation
76,440
77
5,356,895
—
5,356,972
Net loss
—
—
—
( 21,427,964 )
( 21,427,964 )
Balance at December 31, 2019
45,728,831
45,728
371,573,909
( 327,533,414 )
44,086,223
Issuance common stock for cash
4,113,440
4,114
6,181,897
—
6,186,011
Warrants exercised for cash
458,334
459
549,541
—
550,000
Issuance of common stock as commitment fee for future financing
345,357
345
( 345 )
—
—
Stock-based compensation
85,110
85
5,228,324
—
5,228,409
Net loss
—
—
—
( 28,706,070 )
( 28,706,070 )
Balance at December 31, 2020
50,731,072
$
50,731
$
383,533,326
$
( 356,239,484 )
$
27,344,573
The accompanying notes are an integral part of these consolidated financial statements.
F-5
Table of Contents
MARKER THERAPEUTICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended
December 31,
2020
2019
Cash Flows from Operating Activities:
Net loss
$
( 28,706,070 )
$
( 21,427,964 )
Reconciliation of net loss to net cash used in operating activities:
Depreciation and amortization
485,641
105,123
Changes in fair value of warrant liabilities
( 31,000 )
( 18,000 )
Stock-based compensation
5,228,409
5,356,972
Amortization on right-of-use assets
590,039
181,459
Changes in operating assets and liabilities:
Prepaid expenses and deposits
( 531,482 )
( 1,384,725 )
Interest receivable
55,630
51,988
Accounts payable and accrued expenses
4,222,470
( 963,967 )
Lease liability
( 173,268 )
( 185,179 )
Net cash used in operating activities
( 18,859,631 )
( 18,284,293 )
Cash Flows from Investing Activities:
Purchase of property and equipment
( 3,638,849 )
( 374,983 )
Purchase of construction in progress
( 6,789,098 )
—
Net cash used in investing activities
( 10,427,947 )
( 374,983 )
Cash Flows from Financing Activities:
Proceeds from issuance of common stock
6,186,011
—
Proceeds from exercise of stock options
—
57,744
Proceeds from exercise of warrants
550,000
758,733
Net cash provided by financing activities
6,736,011
816,477
Net decrease in cash
( 22,551,567 )
( 17,842,799 )
Cash and cash equivalents at beginning of the period
43,903,949
61,746,748
Cash and cash equivalents at end of the period
$
21,352,382
$
43,903,949
For the Years Ended
December 31,
2020
2019
Supplemental schedule of non-cash financing activities:
Issuance of common stock as commitment fee for future financing
$
345
$
—
Recognition of right-of-use assets and lease liability from new operating lease agreements
$
11,114,300
$
—
Stock warrants cashless exercised
$
—
$
9
The accompanying notes are an integral part of these consolidated financial statements.
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MARKER THERAPEUTICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FISCAL YEARS DECEMBER 31, 2020 AND 2019
NOTE 1: NATURE OF OPERATIONS
Marker Therapeutics, Inc., a Delaware corporation (the “Company” or “we”), is a clinical-stage immuno-oncology company specializing in the development and commercialization of novel T cell-based immunotherapies and innovative peptide-based vaccines for the treatment of hematological malignancies and solid tumor indications. The Company’s MultiTAA-specific T cell technology is based on the selective expansion of non-engineered, tumor-specific T cells that recognize tumor associated antigens, which are tumor targets, and kill tumor cells expressing those targets. These T cells are designed to recognize multiple tumor targets to produce broad spectrum anti-tumor activity. The Company was incorporated in Nevada in 1992 and reincorporated in Delaware in October 2018.
NOTE 2: FINANCIAL CONDITION, GOING CONCERN AND MANAGEMENT PLANS
As of December 31, 2020, the Company had cash and cash equivalents of approximately $ 21.4 million. The Company’s activities since inception have consisted principally of acquiring product and technology rights, raising capital, and performing research and development. Successful completion of the Company’s development programs and, ultimately, the attainment of profitable operations are dependent on future events, including, among other things, its ability to access potential markets; secure financing; successfully progress its product candidates through preclinical and clinical development; obtain regulatory approval of one or more of its product candidates; maintain and enforce intellectual property rights; develop a customer base; attract, retain and motivate qualified personnel; and develop strategic alliances and collaborations. From inception, the Company has been funded by a combination of equity and debt financings.
The Company expects to continue to incur substantial losses over the next several years during its development phase. To fully execute its business plan, the Company will need to complete certain research and development activities and clinical trials. Further, the Company’s product candidates will require regulatory approval prior to commercialization. These activities will span many years and require substantial expenditures to complete and may ultimately be unsuccessful. Any delays in completing these activities could adversely impact the Company. The Company plans to meet its capital requirements primarily through issuances of debt and equity securities and, in the longer term, revenue from sales of its product candidates, if approved.
Based on the Company’s clinical and research and development plans and its timing expectations related to the progress of its programs, the Company expects that its cash and cash equivalents as of December 31, 2020 will enable the Company to fund its operating expenses and capital expenditure requirements into the third quarter of 2021, as such these factors raise substantial doubt regarding the Company's ability to continue as a going concern. The Company has based this estimate on assumptions that may prove to be wrong, and the Company could utilize its available capital resources sooner than it currently expects. Furthermore, the Company’s operating plan may change, and it may need additional funds sooner than planned in order to meet operational needs and capital requirements for product development and commercialization. Because of the numerous risks and uncertainties associated with the development and commercialization of the Company’s product candidates and the extent to which the Company may enter into additional collaborations with third parties to participate in their development and commercialization, the Company is unable to estimate the amounts of increased capital outlays and operating expenditures associated with its current and anticipated clinical trials. The Company’s future funding requirements will depend on many factors, as it:
● initiates or continues clinical trials of its product candidates;
● continues the research and development of its product candidates and seeks to discover additional product candidates;
● seeks regulatory approvals for any product candidates that successfully complete clinical trials;
● maintains and enforces intellectual property rights;
● establishes sales, marketing and distribution infrastructure and scale-up manufacturing capabilities to commercialize any product candidates that may receive regulatory approval;
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● evaluates strategic transactions the Company may undertake; and
● enhances operational, financial and information management systems and hires additional personnel, including personnel to support development of product candidates and, if a product candidate is approved, commercialization efforts.
These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The accompanying consolidated financial statements have been prepared on a going concern basis, which implies that the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.
In addition to the foregoing, based on the Company’s current assessment, the Company does not expect any material impact on its long-term liquidity due to the COVID-19 pandemic. However, the Company will continue to assess the effect of the pandemic on its operations, including its clinical programs. The extent to which the COVID-19 pandemic will impact the Company’s business and operations will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, the duration and effect of business disruptions and the short-term effects and ultimate effectiveness of the travel restrictions, quarantines, social distancing requirements and business closures in the United States and other countries to contain and treat the disease. While the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing the Company’s ability to access capital, which could in the future negatively affect the Company’s liquidity. In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect the Company’s business and the value of its common stock.
NOTE 3: SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. Any reference in these footnotes to applicable guidance is meant to refer to the authoritative U.S. generally accepted accounting principles (“GAAP”) as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).
Principles of Consolidation
These consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Marker Cell Therapy, Inc. and GeneMax Pharmaceuticals Inc. – a dormant subsidiary that wholly owns GeneMax Pharmaceuticals Canada, Inc. All significant intercompany balances and transactions are eliminated upon consolidation.
Use of Estimates
Preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ materially from those estimates. Significant areas requiring management’s estimates and assumptions include valuation allowance on deferred tax assets, determining the fair value of stock-based compensation and stock-based transactions, the fair value of the components of the warrant liabilities and accrued liabilities.
Cash, Cash Equivalents and Credit Risk
The Company considers highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents at December 31, 2020 consisted of cash and certificates of deposit in institutions in the United States. Balances at certain institutions have exceeded Federal Deposit Insurance Corporation insured limits and U.S. government agency securities.
The Company maintains cash in accounts which are in excess of the Federal Deposit Insurance Corporation (“FDIC”) insured limits of $ 250,000 . As of December 31, 2020, approximately $ 2.7 million in cash was uninsured based upon the FDIC insurance coverage limits.
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Property and Equipment
Leasehold improvements, furniture, equipment and software are recorded at cost and are depreciated using the straight-line method over the estimated useful lives of the related assets, which range from three to five years . Leasehold improvements are amortized over the shorter of the estimated useful life or the remaining lease term.
Property and equipment - Construction in Progress
In June 2020, the Company entered into a lease for a manufacturing facility in Houston, Texas. In connection with the manufacturing facility, the Company has incurred costs pursuant to an agreement with a vendor to design, engineer, build and install modular cleanrooms in a manufacturing facility. The facility's construction was completed during December 2020, and a certificate of occupancy was delivered to the Company in January 2021, and as such was placed into service in January 2021. All costs associated with the buildout will be recorded as either manufacturing equipment and/or leasehold improvements and amortized over the estimated useful life of the asset and/or leasehold lease.
Fair Value Measurements
The Company follows Accounting Standards Codification (“ASC”) 820, “Fair Value Measurements and Disclosures,” (“ASC 820”) for the Company’s financial assets and liabilities that are re-measured and reported at fair value at each reporting period and are re-measured and reported at fair value at least annually using a fair value hierarchy that is broken down into three levels. Level inputs are defined as follows:
● Level 1 - Quoted prices (unadjusted) in active markets for identical assets and liabilities.
● Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as unadjusted quoted prices for similar assets and liabilities, unadjusted quoted prices in the markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
● Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities, financial instruments and concentration of credit risk.
Patents and Patent Application Costs
Although the Company believes that its patents and underlying technology have continuing value, the amount of future benefits to be derived from the patents is uncertain. Patent costs are, therefore, expensed as incurred.
Stock-Based Compensation
The Company incurs stock-based compensation expense related to the issuance of common stock and stock options. The Company estimates the fair value of stock options granted using the Black-Scholes option pricing model. The Black-Scholes option pricing model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility and expected option life:
Expected Term — The expected life of stock options was estimated using the "simplified method," as the Company has limited historical information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock options grants. The simplified method is based on the average of the vesting tranches and the contractual life of each grant.
Expected Volatility — The Company computes stock price volatility over expected terms based on its historical common stock trading prices.
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Risk-Free Interest Rate — The Company bases the risk-free interest rate on the implied yield available on U. S. Treasury zero-coupon issues with an equivalent remaining term.
Expected Dividend — The Company has never declared or paid any cash dividends on its common shares and does not plan to pay cash dividends in the foreseeable future, and, therefore, uses an expected dividend yield of zero in its valuation models. The Company amortizes the fair value of the awards expected to vest on a straight-line basis over the requisite service period of the awards. The Company recognizes fair value of stock options granted to nonemployees as stock-based compensation expense over the period in which the related services are received as if the Company had paid cash for those services. Forfeitures are accounted for as incurred.
Research and Development Costs
Research and development expenses consist of expenses incurred in performing research and development activities, including compensation and benefits for research and development employees and consultants, facilities expenses, overhead expenses, cost of laboratory supplies, manufacturing expenses, fees paid to third parties and other outside expenses.
Research and development costs are expensed as incurred. Clinical trial and other development costs incurred by third parties are expensed as the contracted work is performed. The Company accrues for costs incurred as the services are being provided by monitoring the status of the clinical trial or project and the invoices received from its external service providers. The Company estimates depend on the timeliness and accuracy of the data provided by the vendors regarding the status of each project and total project spending. The Company adjusts its accrual as actual costs become known. Where contingent milestone payments are due to third parties under research and development arrangements, the milestone payment obligations are expensed when the milestone events are achieved.
Income Taxes
The Company follows the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of assets and liabilities and their respective tax balances. Potential deferred tax assets and liabilities are measured using enacted tax rates expected to apply to the taxable income in the years in which those differences are expected to be recovered or settled. The effect on potential deferred tax assets and liabilities of a change in tax rates is recognized in the statement of operations in the period that includes the date of allowances against deferred tax assets.
Tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement. A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in the Company’s tax returns that do not meet these recognition and measurement standards. As of December 31, 2020 and 2019, no liability for unrecognized tax benefits was required to be reported. The guidance also discusses the classification of related interest and penalties on income taxes. The Company’s policy is to record interest and penalties on uncertain tax positions as a component of income tax expense. No interest or penalties were recorded during the years ended December 31, 2020 and 2019.
Warrant Liability
The Company evaluates options, warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for. This accounting treatment requires that the carrying amounts of embedded derivatives be marked-to-market at each balance sheet date and carried at fair value. If the fair value is recorded as a liability, the change in fair value during the period is recorded in the Statement of Operations as either income or expense. Upon conversion, exercise or modification to the terms of a derivative instrument, the instrument is marked to fair value at the conversion date and then the related fair value is reclassified to equity.
In circumstances where the embedded conversion option in a convertible instrument is required to be bifurcated and there are also other embedded derivative instruments in the convertible instrument that are required to be bifurcated, the bifurcated derivative instruments are accounted for as a single, compound derivative instrument.
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The classification of financial instruments, including whether such instruments should be recorded as liabilities or as equity, is re-assessed at the end of each reporting period. Equity instruments that are initially classified as equity that become subject to reclassification are reclassified to liability at the fair value of the instrument on the reclassification date. Derivative instrument liabilities will be classified in the balance sheet as current or non-current based on whether or not net-cash settlement of the derivative instrument is expected within 12 months of the balance sheet date.
Management must determine whether an instrument (or an embedded feature) is indexed to the Company’s own stock. An entity should use a two-step approach to evaluate whether an equity-linked financial instrument (or embedded feature) is indexed to its own stock, including evaluating the instrument’s contingent exercise and settlement provisions. This exercise affects the accounting for (i) certain freestanding warrants that contain exercise price adjustment features and (ii) convertible notes containing full-ratchet and anti-dilution protections (iii) certain free-standing warrants that contain contingently putable cash settlement.
Grant Income
The Company recognizes grant income in accordance with the terms stipulated under the grant awarded to the Company’s collaborators at the Mayo Foundation from the U. S. Department of Defense. In various situations, the Company receives certain payments from the U.S. Department of Defense for reimbursement of clinical supplies. These payments are non-refundable and are not dependent on the Company’s ongoing future performance. The Company has adopted a policy of recognizing these payments when received and as revenue in accordance with Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” issued by the Financial Accounting Standards Board.
Loss per Common Share
Basic loss per share includes only the weighted average common shares outstanding, without consideration of potentially dilutive securities. Diluted loss per share includes the weighted average common shares outstanding and any potentially dilutive common stock equivalent shares in the calculation.
New Accounting Standards
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies that we adopt as of the specified effective date. Unless otherwise discussed, the Company does not believe that the impact of recently issued standards that are not yet effective will have a material impact on its financial position or results of operations upon adoption.
Recent Accounting Standards Not Yet Adopted
Income Taxes
In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. This guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. The Company has adopted the new standard effective January 1, 2021 and is currently evaluating the impact of this standard on its consolidated financial statements and related disclosures.
NOTE 4: NET LOSS PER SHARE APPLICABLE TO COMMON SHAREHOLDERS
Net Loss per Share Applicable to Common Stockholders
Basic loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding during the reporting period. Diluted loss per common share is computed similarly to basic loss per common share except that it reflects the potential dilution that could occur if dilutive securities or other obligations to issue common stock were exercised or converted into common stock.
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The following table sets forth the computation of loss per share for the years ended December 31, 2020 and 2019, respectively:
For the Years Ended
December 31,
2020
2019
Numerator:
Net loss
$
( 28,706,070 )
$
( 21,427,964 )
Denominator:
Weighted average common shares outstanding
47,039,862
45,587,734
Net loss per share data:
Basic and diluted
$
( 0.61 )
$
( 0.47 )
The following securities, rounded to the thousand, were not included in the diluted net loss per share calculation because their effect was anti-dilutive for the periods presented:
For the Years Ended
December 31,
2020
2019
Common stock options
6,002,000
4,983,000
Common stock purchase warrants
20,830,000
22,605,000
Common stock warrants - liability treatment
—
59,000
Potentially dilutive securities
26,832,000
27,647,000
NOTE 5: OTHER RECEIVABLE
Pursuant to the Company’s lease agreement for its manufacturing facility, the Company incurred and paid for the construction invoices directly for both the structural improvements of the facility and the building of the manufacturing modular cleanroom (i.e. leasehold improvements and manufacturing equipment). At the time the construction invoices are received by the Company, a fixed asset is recorded in construction-in-progress. In accordance with the agreement, upon completion of the facility’s construction, the Company is owed up to $ 1.0 million as reimbursement, and as such a landlord receivable is recorded, which provides for a legal right to receive construction reimbursements from the landlord for tenant improvement allowances. The construction of the facility was completed during December 2020, and a certificate was occupancy was delivered to the Company in January 2021. During the fiscal year ended 2020, the Company recorded a $ 1.0 million receivable in its consolidated financial statements. The Company expects to receive the $ 1.0 million in the first half of 2021.
NOTE 6: PROPERTY AND EQUIPMENT
Property and equipment consist of the following as of December 31, 2020 and 2019, respectively:
December 31,
December 31,
Estimated Useful Lives
2020
2019
Lab equipment
5 Years
$
2,360,000
$
111,000
Computers, equipment and software
3 - 5 Years
835,000
211,000
Office furniture
5 Years
678,000
178,000
Leasehold improvements
Lesser of lease term or estimated useful life
289,000
23,000
Total
4,162,000
523,000
Less: accumulated depreciation
( 591,000 )
( 105,000 )
Construction in progress
6,789,000
—
Total fixed assets, net
$
10,360,000
$
418,000
Depreciation expense for the years ended December 31, 2020 and 2019 was approximately $ 0.5 million and $ 0.1 million, respectively.
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In June 2020, the Company entered into a lease for a manufacturing facility in Houston, Texas. In connection with the manufacturing facility, the Company has incurred costs pursuant to an agreement with a vendor to design, engineer, build and eventually install modular cleanrooms in a manufacturing facility. $ 6.8 million is recorded in fixed assets – construction in progress on the balance sheet as of December 31, 2020. The completion of the facility’s construction occurred during December 2020 and the Company received its certificate of occupancy in January 2021, and as such was placed into service in January 2021. During January 2021, all costs associated with the buildout will be recorded as either manufacturing equipment and/or leasehold improvements and amortized over the estimated useful life of the asset and/or leasehold lease.
In connection with the research facility that the Company opened during the second quarter of 2020, the Company incurred approximately $ 2.2 million of costs acquiring necessary lab equipment to carry out its experiments. The $ 2.2 million is included in Lab equipment within fixed assets and is being depreciated over five years . Additionally, the Company incurred $ 0.3 million in leasehold improvements relating to the research facility.
NOTE 7: LEASES
The Company entered into a new agreement for its corporate headquarters in Houston, Texas, which commenced in August of 2020. The initial lease term is ten years with two five-year renewal options. Fixed rent payments under the initial term are approximately $ 5.6 million. Additionally, the Company is also responsible for its share of operating expenses. As of December 31, 2020, the Company had remaining $ 4.1 million from the lease liability and $ 4.0 million of the related right-of-use asset resulting from the lease of its corporate headquarters.
In April 2020, the Company entered into a lease for a research facility in Houston, Texas. The lease term is 71 months . Fixed rent payments under the initial term are approximately $ 1.1 million. As of December 31, 2020, the Company had remaining $ 0.8 million from the lease liability and $ 0.8 million of the related right-of-use asset resulting from the lease of its research facility.
In June 2020, the Company entered into a lease for a manufacturing facility in Houston, Texas. The initial lease term is ten years from the rent commencement date in the fourth quarter of 2020 with two five-year renewal options. Fixed rent payments under the initial term are approximately $ 9.8 million. Additionally, the Company is also responsible for its share of operating expenses. In accordance with the agreement, upon completion of the facility’s construction, the Company is owed up to $ 1.0 million as reimbursement, and as such a landlord receivable is recorded, which provides for a legal right to receive construction reimbursements from the landlord for tenant improvement allowances. As of December 31, 2020, the Company had remaining $ 7.2 million from the lease liability and $ 5.8 million of the related right-of-use asset resulting from the lease of its manufacturing facility.
The Company also leases office space under agreements classified as operating leases that expire in 2022. As of December 31, 2020, the Company had remaining $ 0.2 million from the lease liability and $ 0.2 million of the related right-of-use asset resulting from the lease of its Jacksonville, Florida office space, which expires in 2022.
Such leases do not require any contingent rental payments, impose any financial restrictions, or contain any residual value guarantees. Certain of the Company’s leases include renewal options and escalation clauses; renewal options have not been included in the calculation of the lease liabilities and right-of-use assets as the Company is not reasonably certain to exercise the options. Variable expenses generally represent the Company’s share of the landlord’s operating expenses. The Company does not act as a lessor or have any leases classified as financing leases.
At December 31, 2020, the Company had operating lease liabilities of approximately $ 12.3 million and right-of-use assets of approximately $ 10.8 million, which were included in the consolidated balance sheet.
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The following summarizes quantitative information about the Company’s operating leases:
For the Years Ended
December 31,
2020
2019
Operating lease expense summary:
Operating lease expense
$
960,000
$
220,000
Short-term lease expense
22,000
100,000
Variable lease expense
167,000
90,000
Total
$
1,149,000
$
410,000
Other information:
Operating cash flows - operating leases
$
544,000
$
225,000
Weighted-average remaining lease term – operating leases
9.3
1.6
Weighted-average discount rate as of adoption date – operating leases
5.7
%
6.8
%
Maturities of the Company’s operating leases, excluding short-term leases, are as follows:
Year ended December 31, 2021
$
1,077,000
Year ended December 31, 2022
1,278,000
Year ended December 31, 2023
1,542,000
Year ended December 31, 2024
1,826,000
Year ended December 31, 2025
1,874,000
Thereafter
8,772,000
Total
16,369,000
Less present value discount
( 4,112,000 )
Operating lease liabilities included in the Condensed Consolidated Balance Sheet at December 31, 2020
$
12,257,000
NOTE 8: ACCOUNTS PAYABLE AND ACCRUED LIABILITIES
Accounts payable and accrued liabilities consist of the following as of December 31, 2020 and 2019, respectively:
December 31,
December 31,
2020
2019
Accounts payable
$
2,935,000
$
993,000
Compensation and benefits
1,694,000
323,000
Professional fees
875,000
94,000
Technology license fees
105,000
105,000
Other
404,000
243,000
Total accounts payable and accrued liabilities
$
6,013,000
$
1,758,000
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NOTE 9: WARRANT LIABILITY
A weighted average summary of quantitative information with respect to valuation methodology and significant unobservable inputs used for the Company’s common stock purchase warrants that are categorized within Level 3 of the fair value hierarchy for the years ended 2020 and 2019, respectively:
Weighted Average Inputs
For the Years Ended
December 31,
2020
2019
Exercise price
$
—
$
6.92
Contractual term (years)
—
0.05
Volatility (annual)
—
83
%
Risk-free rate
—
2
%
Dividend yield (per share)
—
0
%
The foregoing assumptions are recalculated every reporting period and are subject to change based primarily on management’s assessment of the probability of the events described occurring. Accordingly, changes to these assessments could materially affect the valuations.
The following table presents changes in Level 3 warrant liabilities, reflected in accrued expenses measured at fair value for the years ended December 31, 2020 and 2019, respectively:
Warrant
Liability
Balance - January 1, 2019
49,000
Change in fair value of warrant liability
( 18,000 )
Balance – December 31, 2019
31,000
Change in fair value of warrant liability
( 31,000 )
Balance – December 31, 2020
$
—
NOTE 10: FAIR VALUE MEASUREMENTS
Financial assets and liabilities measured at fair value on a recurring basis are summarized below and disclosed on the balance sheet under Warrant liability:
Fair value measured at December 31, 2020
Quoted prices in active
Significant other
Significant
markets
observable inputs
unobservable inputs
Fair value at
(Level 1)
(Level 2)
(Level 3)
December 31, 2020
Warrant liability
$
—
$
—
$
—
$
—
Fair value measured at December 31, 2019
Quoted prices in active
Significant other
Significant
markets
observable inputs
unobservable inputs
Fair value at
(Level 1)
(Level 2)
(Level 3)
December 31, 2019
Warrant liability
$
—
$
—
$
31,000
$
31,000
There were no transfers between Level 1, 2 or 3 during the years ended December 31, 2020 and 2019, respectively.
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The valuation of warrants is subjective and is affected by changes in inputs to the valuation model including the price per share of common stock, the historical volatility of the stock price, risk-free rates based on U. S. Treasury security yields, the expected term of the warrants and dividend yield. Changes in these assumptions can materially affect the fair value estimate. The Company could ultimately incur amounts to settle the warrant at a cash settlement value that is significantly different than the carrying value of the liability on the financial statements. The Company will continue to classify the fair value of the warrants as a liability until the warrants are exercised, expire, or are amended in a way that would no longer require these warrants to be classified as a liability. Changes in the fair value of the common stock warrants liability are recognized as a component of other income (expense) in the Statements of Operations.
The net cash settlement value at the time of any future transactions, where the Company consolidates or merges with another entity, will depend upon the value of the following inputs at that time: the consideration value per share of the Company’s common stock, the volatility of the Company’s common stock, the remaining term of the warrant from announcement date, the risk-free interest rate based on U. S. Treasury security yields, and the Company’s dividend yield. The warrant requires use of a volatility assumption equal to the greater of 100% and the 100-day volatility function determined as of the trading day immediately following announcement of a Fundamental Transaction.
NOTE 11: STOCKHOLDERS’ EQUITY
Preferred Stock
The Company has authorized up to 5,000,000 shares of preferred stock, $ 0.001 par value per share, for issuance. The preferred stock will have such rights, privileges and restrictions, including voting rights, dividend conversion rights, redemption privileges and liquidation preferences, as shall be determined by the Company’s board of directors upon its issuance. To date, the Company has not issued any preferred shares.
Common Stock
The Company has authorized up to 150,000,000 shares of common stock, $ 0.001 par value per share, for issuance. Significant 2020 and 2019 common stock transactions were as follows:
2020 Common Stock Transactions
Exercise of Stock Warrants
During the year ended December 31, 2020, certain outstanding warrants were exercised for 0.5 million shares of common stock providing aggregate proceeds to the Company of approximately $ 0.6 million.
Board Compensation
During the year ended December 31, 2020, the Company issued an aggregate of 0.1 million shares of common stock to its non-employee directors. The fair value of the common stock of approximately $ 0.2 million was recognized as a component of stock-based compensation expense in general and administrative expenses.
Aspire Capital
On February 28, 2020, the Company entered into a common stock purchase agreement (the “Purchase Agreement”) with Aspire Capital Fund, LLC (“Aspire Capital”) which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $ 30.0 million of shares of the Company’s common stock over the 30-month term of the purchase agreement. In consideration for entering into the purchase agreement, the Company issued to Aspire Capital 0.3 million shares of the Company’s common stock as a commitment fee. The Company recorded the commitment fee to additional paid in capital. As of December 31, 2020, Aspire Capital had purchased 4.1 million shares under the Purchase Agreement, providing aggregate proceeds to the Company of approximately $ 6.2 million.
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2019 Common Stock Transactions
Consulting Arrangements
During the year ended December 31, 2019, the Company issued 0.05 million shares of common stock in connection with consulting agreements. The fair value of the common stock of approximately $ 0.3 million was recognized as stock-based compensation expense in general and administrative expenses.
Board Compensation
During the year ended December 31, 2019, the Company issued an aggregate of 0.03 million shares of common stock to its non-employee directors. The fair value of the common stock of approximately $ 0.2 million was recognized as stock-based compensation expense in general and administrative expenses.
NOTE 12: WARRANTS
Share Purchase Warrants
A summary of the Company’s share purchase warrants as of December 31, 2020 and 2019, respectively, and changes during the period is presented below:
Weighted Average
Number of
Weighted Average
Remaining Contractual
Total Intrinsic
Warrants
Exercise Price
Life (in years)
Value
Balance - January 1, 2019
23,016,000
4.78
4.29
$
26,066,000
Warrants granted
45,000
4.26
—
—
Exercised for cash
( 190,000 )
3.99
—
—
Cashless exercise
( 17,000 )
2.38
—
—
Expired or cancelled
( 190,000 )
13.63
—
—
Balance - December 31, 2019
22,664,000
4.71
3.33
954,000
Exercised for cash
( 458,000 )
1.20
—
—
Expired or cancelled
( 1,376,000 )
9.46
—
—
Balance - December 31, 2020
20,830,000
$
4.47
2.60
$
—
2020 Warrant Transactions
Exercise of Stock Warrants
During the year ended December 31, 2020, certain outstanding warrants were exercised for 0.5 million shares of common stock providing aggregate proceeds to the Company of approximately $ 0.6 million.
2019 Warrant Transactions
Exercise of Stock Warrants
During the year ended December 31, 2019, certain outstanding warrants were exercised for 0.2 million shares of common stock providing aggregate proceeds to the Company of approximately $ 0.8 million.
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Table of Contents
NOTE 13: STOCK OPTION PLANS
Options to Purchase Shares of Common Stock
2020 Equity Incentive Plan
On May 19, 2020, the Board adopted the 2020 Equity Incentive Plan ("2020 Plan") which replaced the 2014 Omnibus Stock Option Plan (“2014 Plan”). The 2020 Plan allows for grants of stock options, restricted shares, stock bonuses and other equity-based awards to employees and non-employee directors of the Company. Awards under the 2020 Plan may be at prices and for terms as determined by the Board of Directors and may have vesting requirements as determined by the Board, provided that the exercise price for any stock option must be at least equal to the fair market value (as defined in the 2020 Plan) of a share of the stock on the grant date. Once granted, the exercise price of an option may not be reduced without the approval of the Company’s stockholders, other than under certain limited circumstances such as a stock split or take any other action with respect to a stock option that would be treated as a repricing under the rules and regulations of the New York Stock Exchange.
Options granted under the 2020 Plan have a maximum term of ten years from the date of grant. Options granted in 2020 and 2019 generally vest over four years .
As of December 31, 2020, approximately 4.7 million options are available to be issued from the 2020 Plan.
2014 Omnibus Stock Ownership Plan
The 2014 Plan, which the Board adopted on May 19, 2020 and subsequently amended from time to time, allowed for grants of stock options, restricted shares, stock bonuses and other equity-based awards to employees and non-employee directors of the Company. The terms of the 2014 plan are substantially identical to the terms of the 2020 Plan described above.
Stock Options
A summary of the Company’s stock option activity is as follows for stock options:
Weighted Average
Remaining
Weighted Average
Total Intrinsic
Contractual
Number of Shares
Exercise Price
Value
Life (in years)
Outstanding as of January 1, 2020
4,983,314
$
7.79
$
18,000
8.9
Granted
1,531,000
2.08
—
9.2
Canceled
( 512,500 )
—
—
—
Outstanding as of December 31, 2020
6,001,814
$
6.22
$
—
8.3
Options vested and exercisable
2,598,981
$
7.29
$
—
8.0
The Black-Scholes option pricing model is used to estimate the fair value of stock options granted under the Company’s share-based compensation plans. The weighted average assumptions used in calculating the fair values of stock options that were granted during the years ended December 31, 2020 and 2019, respectively, were as follows:
For the Years Ended
December 31,
2020
2019
Exercise price
$
2.08
$
4.70
Expected term (years)
6.0
6.0
Expected stock price volatility
108
%
126
%
Risk-free rate of interest
1
%
2
%
Expected dividend rate
0
%
0
%
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Table of Contents
The following table sets forth stock-based compensation expenses recorded during the respective periods:
For the Years Ended
December 31,
2020
2019
Stock Compensation expenses:
Research and development
$
2,588,000
$
2,574,000
General and administrative
2,640,000
2,783,000
Total stock compensation expenses
$
5,228,000
$
5,357,000
At December 31, 2020, the total stock-based compensation cost related to unvested awards not yet recognized was $ 10.6 million. The expected weighted average period compensation costs to be recognized was 2.2 years. Future option grants will impact the compensation expense recognized.
NOTE 14: GRANT INCOME
During the years ended December 31, 2020 and 2019, the Company received $ 0.5 million and $ 0.2 million, respectively, of a grant awarded to Mayo Foundation from the U.S. Department of Defense for the Phase II Clinical Trial of TPIV200. The grant compensated the Company for clinical supplies manufactured and provided by the Company for the clinical study. In accordance with Accounting Standards Update No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” issued by the Financial Accounting Standards Board, the Company recorded the $ 0.5 million and $ 0.2 million, respectively, of grant income as revenue.
NOTE 15: COMMITMENTS AND CONTINGENCIES
An arbitration proceeding was brought against the Company before the Financial Industry Regulatory Authority, Inc. by a broker seeking to be paid approximately $ 1.0 million as compensation for two financing transactions that occurred in 2018, a warrant conversion and a private placement brokered by another broker. The broker’s claims are based on a placement agent agreement for a private placement it brokered in 2017, under which it alleges it is entitled to compensation for the 2018 transactions. The Company believes it has defenses to all of the allegations and intends to vigorously defend itself in this matter.
NOTE 16: LEGAL PROCEEDINGS
From time to time, the Company may be party to ordinary, routine litigation incidental to their business. The Company knows of no material, active or pending legal proceedings against the Company, nor is the Company involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of the Company’s directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to the Company’s interest.
NOTE 17: RELATED PARTY TRANSACTIONS
The following table sets forth related party transaction expenses recorded for the years ended December 31, 2020 and 2019, respectively.
For the Years Ended
December 31,
2020
2019
Baylor College of Medicine
$
1,818,000
$
69,000
Bio-Techne Corporation
152,000
51,000
Dr Juan Vera
$
—
$
233,000
Total Research and development
$
1,970,000
$
353,000
Agreements with The Baylor College of Medicine (“BCM”) .
In November 2018 and February 2020, the Company entered in Sponsored Research Agreements with BCM, which provided for the conduct of research for the Company by credentialed personnel at BCM’s Center for Cell and Gene Therapy.
F-19
Table of Contents
In September 2019, the Company entered in a Clinical Supply Agreement with BCM, which provided for BCM to provide to the Company multi tumor antigen specific products.
In October 2019, the Company entered in a Workforce Grant Agreement with BCM, which provided for BCM to provide to the Company manpower costs of projects for manufacturing, quality control testing and validation run activities.
In August 2020, the Company entered in a Clinical Trial Agreement with BCM, which provided for BCM to provide to the Company investigator-initiated research studies.
Purchases from Bio-Techne Corporation .
The Company is currently utilizing Bio-Techne Corporation and two of its brands for the purchases of reagents, primarily cytokines. Mr. David Eansor is a member of the Company's board of directors and is serving as the President of the Protein Sciences Segment of Bio-Techne Corporation.
Consulting Agreement with Dr. Juan Vera . On October 19, 2018, after the closing of the Company’s merger, the Company entered into a consulting agreement with Dr. Juan Vera, a member of the Company’s board of directors, to serve as the Company’s Chief Development Officer. On September 1, 2019, Dr. Vera became an employee of the Company and his consulting agreement was terminated.
NOTE 18: INCOME TAXES
The Company has no income tax expense due to operating losses incurred for the years ended December 31, 2020 and 2019.
The effects of temporary differences that give rise to significant portions of the deferred tax assets as of December 31, 2020 and 2019 are as follows:
For the Years Ended
December 31,
2020
2019
Deferred Tax Assets
Net Operating Loss Carryforward
21,783,000
17,166,000
Stock Compensation
6,775,000
6,538,000
License Agreements
144,000
177,000
Research and Development
733,000
733,000
Charitable Contributions
8,000
9,000
Operating Lease Liability
2,626,000
115,000
32,069,000
24,738,000
Less: Valuation Allowance
( 29,689,000 )
( 24,632,000 )
Total Deferred Tax Assets
2,380,000
106,000
Deferred Tax Liabilities
Fixed Assets
—
( 106,000 )
Right-of-Use Assets
( 2,380,000 )
—
Total Deferred Tax Liabilities
( 2,380,000 )
( 106,000 )
Net Deferred Tax Assets/(Liabilities)
—
—
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Table of Contents
The Company assesses the likelihood that deferred tax assets will be realized. To the extent that realization is not likely, a valuation allowance is established. Based upon the history of losses, management believes that it is more likely than not that future benefits of deferred tax assets will not be realized and has established a full valuation allowance for the years ended December 31, 2020 and 2019. The valuation allowance increased by $ 5.1 million as of December 31, 2020. The Company has research and development tax credit carryforwards of $ 0.7 million available to offset future federal income taxes. The research and development tax credit carryforwards begin to expire in 2030.
The Company has approximately $ 97.2 million of federal and $ 39.0 million of state Net Operating Losses (“NOL”s) that may be available to offset future taxable income, if any. The federal net operating loss carryforwards of $ 41.6 million, if not utilized, will expire between 2029 and 2037 . The federal net operating loss carryforwards of $ 55.6 million generated in 2018 and thereafter are subject to an 80 % limitation on taxable income, do not expire and will carry forward indefinitely. The state net operating loss carryforwards of $ 21.9 million, if not utilized, will begin to expire in 2035. The state net operating loss carryforwards of $ 17.1 million generated in 2018 and thereafter are subject to an 80 % limitation on taxable income, do not expire and will carry forward indefinitely.
In accordance with Section 382 of the Internal Revenue code, the usage of the Company’s net operating loss carryforwards may be limited in the event of a change in ownership. A full Section 382 analysis has not been prepared and NOLs could be subject to limitation under Section 382.
The Company’s income tax returns for 2016 to 2019 are still open and subject to audit. In addition, net operating losses arising from prior years are also subject to examination at the time they are utilized in future years.
For the years ended December 31, 2020 and 2019, the expected tax expense (benefit) based on the U. S. federal statutory rate is reconciled with the actual tax provision (benefit) as follows:
For the Years Ended December 31,
2020
2019
Percent of
Percent of
Amount
Pre-Tax Loss
Amount
Pre-Tax Loss
U.S. federal statutory rate
( 6,028,000 )
21.00
%
( 4,500,000 )
21.00
%
State taxes, net of federal benefit
( 118,000 )
0.41
%
( 600,000 )
2.80
%
Tax rate change
677,000
( 2.36 )
%
665,000
( 3.10 )
%
Permanent Differences
- Change in fair value of derivative liabilities
( 7,000 )
0.02
%
( 4,000 )
0.02
%
- Other permanent differences
182,000
( 0.63 )
%
32,000
( 0.15 )
%
Change in valuation allowance
5,057,000
( 17.62 )
%
4,681,000
( 21.85 )
%
Deferred true-up
237,000
( 0.83 )
%
( 274,000 )
1.28
%
Income tax provision/(benefit)
—
0.00
%
—
0.00
%
ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. As of December 31, 2020, and 2019, there were no unrecognized tax benefits. The Company recognizes accrued interest and penalties as income tax expense. No amounts were accrued for the payment of interest and penalties at December 31, 2020 and 2019. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position in the next year.
On March 27, 2020, the CARES Act was enabled in response to COVID-19 pandemic. Under ASC 740, the effects of changes in tax rates and laws are recognized in the period which the new legislation is enacted. The CARES Act made various tax law changes including among other things (i) increasing the limitation under Section 163(j) of the Internal Revenue Code of 1986, as amended (the “IRC”) for 2019 and 2020 to permit additional expensing of interest, (ii) enacting a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k),(iii) making modifications to the federal net operating loss rules including permitting federal net operating losses incurred in 2018, 2019 and 2020 to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes and (iv) enhancing the recoverability of alternative minimum tax credits. Given the Company’s full valuation allowance position, the CARES Act did not have an impact on the financial statements.
F-21
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.